Saturday, May 6, 2017

(TV) Pay TV: The Pay TV apocalypse continues

It's no secret that we're the golden age of televisionbut its also no state secret that cable and satellite Pay TV providers have been taking a pounding for years which has culminated this week with the worst quarter in the history of the industry with Pay TV providers losing a whopping 762,00 subscribers.

Why Pay TV providers are losing subscribers at a record rate isn't rocket science with the combination of skyrocketing price hikes, an increasingly unpopular business model, and better digital alternatives offering by SVOD services such as Netflix, Amazon and Hulu, it was only a matter of time before quarterslike this become the new normal.

What's worse is that Pay TV providers are in no position to do much about it as they contend with soaring programming costs largely fuelled by the increasing value ofsports content. Pay TV providers have for years passed this cost onto customers without much to sweeten the deal which has seen an customer cut their cords at record rates for the best part of a decade.

It's always concerning when an industry can't keep its customers and even more so when can't attract new ones but the pay TV industry recent bloodletting has shown that can't do either which is why an already mature market is now showing signs of atrophy.

The decision to pay lengthy and expensivepremiums for sports TV rights has cost Pay TV providers dearly but rationale behind pay TV's bet on live sportmade sense as live sport events such as the Super Bowl or march madnesshave proved to be the most reliable content for getting bums on sofas across the land at the same time but as the last NFL regular season proved, sports content is showing signs of losing its lustre. The 7% dip in regular season viewing and a drop in Super Bowl viewershipfor the second year running saw many executives clamouring for answers to why NFL ratings dropped from a highly divisive presidential edition to ColinKaepernick's stance (or lack thereof) during the national anthem.

However, despite the complicated and varying factors that negatively affected NFL viewership during both regular and postseason games, the fact remains that pay TV's costly bet on sports programming is starting to unravel and it's unclear whether last year was a blip or a start of a very grave trend.

Despite their recent struggles, Pay TV providers aren't sitting on their handsand idly watching their industry crumble before their eyes with pay TV operators increasing their digital footprint with skinny bundles and even SVOD offerings that appeal to cord cutters and cord nevers who enjoy the power of watching TV where, how, and when they want to.

However, Pay TV providers fight in keeping and attracting new customersis taking a turn for the worse with Amazon and Facebook picking up live sports content deals. This development should scare the life out of pay TV executives everywhere asWhile Amazon's deal in particular involves the ecommerce giant airing much maligned Thursday night games, should Amazon attract large audiences for Thursday night NFL matchups or at least larger viewership number than their cable counterparts. It could see live sport content providers hosting more of their content with online partners.

This would be a disaster for Pay TV providers and networks as they'll have to outspend deep pocketed behemoths for live sports contentwhen the costfor live sports TV rightsare already high. Pay TV providers will be forced to pass even more costs onto a customer base already looking for a reason to jump ship.

However, what should keep pay TV executives up at night is that whether Amazon or Facebook attract large audiences for NFL or MLS games or notis what they'll learn about sports viewers. The reason why both Facebook and Amazon have largely pulled away from their direct competitors and send shivers down the spine of executives everywhere when they so much as hint about entering their market is because both companies are become very good at using datafrom their users to provide a more personalized serviceto the point they know their customers better inside out, literally.

It's why both companies have abnormally high customer retention rates and neverhave trouble attracting new users as their ability to implicitly meet the needs of their users through data keeps current users hooked with new featuresand services which in turn provides Amazon and Facebooknew opportunities to learn even moreabout their users habits.

What all this means is should Amazon and Facebook deliver impressive viewership numbers, Pay TV will have a hard time getting those customers back. This alone will put a steak through the hearts of Pay TV providers everywhere who will continue to lose customers, spend and lose millions trying to get them back and surrender their future customer base to SVOD services.

In sum, there has been much talk about the future of Television but now the chatter should cease as the future is here and it's going to be brutal.